Babson Capital/UNC Charlotte Economic Forecast May 13, 2014
Outline for Today Myths and Realities of this Recovery Positive Economic Signs Negative Economic Signs Outlook for 2014 The Employment Picture Housing Trends
Headlines for 1914 Ford Raises Daily Wage from $2.40 to $5.00 Panama Canal Opens Austria Declares War Burnett-anti-immigration Law Passes
The Economy in1914 U.S. GDP Real Per Capita GDP Federal Spending CPI Unemployment Rate $36.5 billion $4,799 (Honduras) $730 million ($17 bil.) 10 7.9%
Myths and Realities of this Recovery
Current Expansion Began July 2009 58 months 7 th longest of 33 total expansions since December 1854
2006-2013 U.S. GDP 4 3 2 2.7 1.8 2.5 1.8 2.8 1.9 1 0-1 -0.3-2 -3-4 -2.8 2006 2007 2008 2009 2010 2011 2012 2013
2009-2014 U.S. Quarterly GDP 5 3 1 1.3 3.9 1.6 3.9 2.8 2.8 3.2 1.4 4.9 3.7 1.2 2.8 0.1 1.1 2.5 4.1 2.6 0.1-1 -3-0.4-1.3-5 -5.4-7 2009 I II III IV 2010 I II III IV 2011 I II III IV 2012 I II III IV 2013 I II III IV 2014 I
2007-2013 United States Payroll Employment Employment Decline: -8,710,000 Employment Gain: 8,044,000 Percent Recovered: 92.4%
What s the Target? 3,000,000 Jobs per Year 250,000 Jobs per Month
US Job Growth 2012 2,193,000 jobs 182,750 per month (Second Largest Job Growth Since 1999)
US Job Growth 2013 2,186,000 jobs 182,150 per month (Third Largest Job Growth Since 1999)
-6,000-5,000-4,000-3,000-2,000-1,000 0 1,000 2,000 3,000 4,000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-848 1,168 2,810 3,844 2,157 2,810 3,391 3,014 3,170 1,944-1,757-532 62 2,019 2,484 2,071 1,115-3,617-5,052 1,022 2,103 2,193 2,186 U.S. Job Growth 1990-2013
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 2007 2013 Labor Force Participation Rates 70 68 U.S. August US LFPR 63.2% 66 64 62 60
1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 1947 2013 Labor Force Participation Rates 70 68 66 64 62 60 58 56 54 52 50 1998-2000 US LFPR 67.1% 2013 US LFPR 63.7%
Labor Force Participation Rate # of People Employed + # of People Unemployed Noninstitutional Population 16 +
2010 Population By Age Group Age Group Count Under 5 years 20,201,362 5 to 9 years 20,348,657 10 to 14 years 20,677,194 15 to 19 years 22,040,343 20 to 24 years 21,585,999 25 to 29 years 21,101,849 30 to 34 years 19,962,099 35 to 39 years 20,179,642 40 to 44 years 20,890,964 45 to 49 years 22,708,591 50 to 54 years 22,298,125 55 to 59 years 19,664,805 60 to 64 years 16,817,924 65 to 69 years 12,435,263 70 to 74 years 9,278,166 75 to 79 years 7,317,795 80 to 84 years 5,743,327 85 years and over 5,493,433
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 NC Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 4 3 January 2010 3.97 Persons per Job Opening November 2013 1.57 Persons per Job Opening 2 1 January 2008 1.21 Persons per Job Opening 0
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 MSA Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 4 December 2009 3.09 Persons per Job Opening 3 2 November 2013 1.28 Persons per Job Opening 1 0 January 2008 0.84 Persons per Job Opening
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 SC Number of Unemployed per Job Opening (Not Seasonally Adjusted) 5 4 November 2009 4.46 Persons per Job Opening 3 2 1 January 2008 1.46 Persons per Job Opening November 2013 1.34 Persons per Job Opening 0
Housing Stock/Prices Interest Rates Inflation Consumer Credit Consumer Confidence Dollar Gas Prices Budget Deficit Positive Indicators
Jan-05 Apr Jul Oct Jan-06 Apr Jul Oct Jan-07 Apr Jul Oct Jan-08 Apr Jul Oct Jan-09 Apr Jul Oct Jan-10 Apr Jul Oct Jan-11 Apr Jul Oct Jan-12 Apr Jul Oct Jan-13 Apr Jul Oct Jan U.S. Monthly New Home Inventory (Seasonally Adjusted) 16 14 12 10 8 6 4 2 January 2009 12.4 Months Supply December 2014 4.7 Months Supply 0
Monthly Federal Funds Rate 1996-2013 7 6 5 4 3 2 1 0 Current Rate 0 -.25%
Percentage Changes in CPI 1949-2013 15 13 11 9 Annual Increases 2009-0.4% 2010 1.6% 2011 3.0% 2012 1.7% 2013 1.5% 7 5 3 1-1
1/1/1980 10/1/1980 7/1/1981 4/1/1982 1/1/1983 10/1/1983 7/1/1984 4/1/1985 1/1/1986 10/1/1986 7/1/1987 4/1/1988 1/1/1989 10/1/1989 7/1/1990 4/1/1991 1/1/1992 10/1/1992 7/1/1993 4/1/1994 1/1/1995 10/1/1995 7/1/1996 4/1/1997 1/1/1998 10/1/1998 7/1/1999 4/1/2000 1/1/2001 10/1/2001 7/1/2002 4/1/2003 1/1/2004 10/1/2004 7/1/2005 4/1/2006 1/1/2007 10/1/2007 7/1/2008 4/1/2009 1/1/2010 10/1/2010 7/1/2011 4/1/2012 1/1/2013 1980-2013 U.S. Household Debt Payments as a Percent of Income 20 Peak 2007 III 13.18% 15 10 5 Current 9.93% 0
Consumer Confidence 120 112.6 October 1992 54.6 March 2009 25.0 April 2014 82.3 100 95.2 80 60 40 62.8 56.9 38.0 44.9 25.0 40.8 47.4 54.1 46.0 70.4 63.3 57.7 51.0 53.5 65.4 59.2 64.9 69.6 81.5 81.7 20 0 Jul 07 Apr 08 Sep 08 Dec 08 May 09 Jan 10 Apr 10 Aug 10 Mar 11 Jul 11 Jan 12 Aug 12 Feb 13 13-Dec
2000-2013 Dollar Price of Euro 1.7 1.5 1.3 1.1 0.9 0.7 0.5 $0.87 $1.36
Monthly Gas Prices 2012-2014 5.00 4.00 3.91 3.96 3.79 3.64 3.78 3.91 3.60 3.44 3.50 3.813.52 3.38 3.39 3.74 3.78 3.64 3.68 3.69 3.66 3.64 3.60 3.42 3.32 3.36 3.39 3.43 3.00 2.00 1.00 0.00 January February March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 June 2013 July 2013 August 2013 September 2013 October 2013 November 2013 December 2013 January February
Effect of Energy Price Increase on U.S. Economy Annual Transportation Usage 187 billion gallons per year Annual Total Usage 288 billion gallons per year Effect of a $.50 increase in price Transportation $93.5 billion per year Total $144.0 billion per year
Year 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 f 2015 f 2017 f 2019 f 2021 f 2023 f 1980 2023 U.S. Budget Deficit 1000 500 2013 Budget Deficit $672 billion 2015 Budget Deficit $388 billion 0-500 -1000-1500
Negative Indicators Excess Reserves Trade Deficit Tax Increases
1/1/2008 3/1/2008 5/1/2008 7/1/2008 9/1/2008 11/1/2008 1/1/2009 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/2009 1/1/2010 3/1/2020 5/1/2010 7/1/2010 9/1/2010 11/1/2010 1/1/2011 3/1/2011 5/1/2011 7/1/2011 9/1/2011 11/1/2011 1/1/2012 3/1/2012 5/1/2012 7/1/2012 9/1/2012 11/1/2012 1/1/2013 3/1/2013 5/1/2013 7/1/2013 9/1/2013 11/1/2013 1/1/2014 3/1/2014 2008 2014 Banking System Excess Reserves 2600 2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 March Excess Reserves $2,545 billion
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 1992-2013 U.S. Trade Deficits 0-100000 -200000-300000 -400000-500000 -600000-700000 -800000 2006Trade Deficit $799 Billion 2008 Trade Deficit $681 Billion 2009 Trade Deficit $382 Billion 2013TradeDeficit $475 Billion -900000
Spending Cuts 2014-2015 Fiscal Year 2014 Original Sequestration $100 billion New Sequestration $50 billion Fiscal Year 2015 Original Sequestration $100 billion New Sequestration $75 billion
Outlook for 2014
Employment Picture
Mining Construction Manufacturing Wholesale Trade Retail Trade TWU Information FIRE B&P Services H&E Services Leisure Services Other Services Government U.S. Jobs Lost Jobs Gained 1500 2240 1428 1356 1000 987.9 790 500 216 311 568 364.2 392.9 191 185 82 0-500 -1000-71 -591.4-408.3-62 -292-551 -607-207 -621-1500 -1173.3-1488 -2000-1954 -2500-2265
The North Carolina Experiment
NC Unemployment Benefit Changes Old Benefit New Benefit 26 Weeks $535/week max benefit 12-20 Weeks $350/week max benefit
July 2013 Unemployment Rates State Rate NEVADA 9.5 ILLINOIS 9.2 NORTH CAROLINA 8.9 RHODE ISLAND 8.9 GEORGIA 8.8 MICHIGAN 8.8 CALIFORNIA 8.7 NEW JERSEY 8.6 MISSISSIPPI 8.5 TENNESSEE 8.5
State December 2013 Unemployment Rates Rate RHODE ISLAND 9.3 NEVADA 9.0 ILLINOIS 8.9 CALIFORNIA 8.3 MICHIGAN 8.3 KENTUCKY 7.9 MISSISSIPPI 7.8 TENNESSEE 7.7 ARIZONA 7.6 ARKANSAS 7.4 CONNECTICUT 7.4 GEORGIA 7.4 NEW JERSEY 7.2 MASSACHUSETTS 7.1 OHIO 7.1 OREGON 7.1 NEW YORK 7.0 NORTH CAROLINA 6.9 INDIANA 6.8 PENNSYLVANIA 6.8 WASHINGTON 6.7 SOUTH CAROLINA 6.6
2013 North Carolina Labor Force 4,800,000 4,780,000 4,760,000 4,740,000 4,720,000 4,700,000 4,680,000 4,660,000 4,640,000 4,620,000 4,600,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 North Carolina Unemployment 440,000 420,000 400,000 380,000 360,000 340,000 320,000 300,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 North Carolina Employment 4,400,000 4,390,000 4,380,000 4,370,000 4,360,000 4,350,000 4,340,000 4,330,000 4,320,000 4,310,000 4,300,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013-2014 North Carolina Unemployment Rate 11 10 9 December Rate 6.9% 8 7 6 5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR NC Seasonally Adjusted NC Seasonally Adjusted Forecast US Seasonally Adjusted
Housing in 2013
I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV US Residential Construction (NIPA) 2007-2013 800 749.3 717.3 700 671.7 616.4 600 500 400 565.5 538.4 507.4 452.1 405.5 392 395.2 400.8 383.1 376.3 532.6 531 513.2 490.3 468.8 443.7 418.4 425.7 365.6 374.7 377.1 381 386.8 398.1 300 200 100 0 2007 2008 2009 2010 2011 2012 2013
US Residential Building Permits Year Total Permits Single Family Permits 1991 948.8 753.5 1992 1,094.9 910.7 1993 1,199.1 986.5 1994 1,371.6 1,068.5 1995 1,332.5 997.3 1996 1,425.6 1,069.5 1997 1,441.1 1,062.4 1998 1,612.3 1,187.6 1999 1,663.5 1,246.7 2000 1,592.3 1,198.1 2001 1,636.7 1,235.6 2002 1,747.7 1,332.6 2003 1,889.2 1,460.9 2004 2,070.1 1,613.4 2005 2,155.3 1,682.0 2006 1,838.9 1,378.2 2007 1,398.4 979.9 2008 905.4 575.6 2009 583.0 441.1 2010 604.6 447.3 2011 624.1 418.5 2012 829.7 518.7 2013 957.0 608.5
NC Residential Building Permits Year Total Permits Single Family Permits 2002 79,824 66,400 2003 79,226 66,883 2004 93,077 77,147 2005 97,910 84,975 2006 99,979 82,672 2007 85,777 70,339 2008 54,652 39,082 2009 33,800 25,388 2010 33,889 26,047 2011 32,804 24,863 2012 48,692 29,945 2013* 50,510 35,399 * Based on 11 months of data
Jan-05 Apr Jul Oct Jan-06 Apr Jul Oct Jan-07 Apr Jul Oct Jan-08 Apr Jul Oct Jan-09 Apr Jul Oct Jan-10 Apr Jul Oct Jan-11 Apr Jul Oct Jan-12 Apr Jul Oct Jan-13 Apr Jul Oct U.S. Monthly New Home Inventory (Seasonally Adjusted) 16 14 12 10 8 6 4 2 January 2009 12.4 Months Supply November 2013 4.3 Months Supply 0
US Case Schiller Housing Price Index (Composite 20) Month Index Condition Percent Change January 2000 100.00 Base July 2006 206.52 Peak 106.5% March 2012 134.07 Trough -35.1% February 2013 146.51 9.3% February 2014 165.35 Current 12.9%
Keys to Watch Consumer Confidence Consumer Debt Housing Prices Excess Reserves US Monthly Job Growth (1 st Friday) Gasoline Prices
Babson Capital/UNC Charlotte Economic Forecast May 13, 2014
1980 1969 19481953 1974 1960 1957 1981 1990 2001 2007 Updated Sept 2013